GameStop Rally Stopped Short on Downgrade

The company allegedly called themselves "essential retail" in a memo sent out to employees

Lillian Currens
Mar 20, 2020 at 10:29 AM
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Video game retailer GameStop Corp (NYSE:GME) has reversed course this morning, down 7.4% to trade at $3.88, after Wedbush downgraded the equity to "neutral" from "outperform" and slashed its price target to $4.25 from $8. This comes just one day after, according to a report from Kotaku, the company called itself "essential retail" in a memo to its employees and instructed them to remain open despite massive coronavirus closures around the globe. 

Prior to today, GME was struggling to rally off its late-February six-month low of $3.18, with recent support emerging at the $3.60 region. Unfortunately, this attempt at a rebound was cut short by the equity's 60-day moving average, with additional pressure emerging at the 200-day moving average -- a familiar ceiling for GME since early 2019. Now, GameStop is off 35.4% for the year. 

Wedbush's bear note isn't too out of left field. In fact, coming into today five of the six covering GameStop considered it a "hold" or worse. Plus, the consensus 12-month target price of $4.01 is just a chip shot away from last night's close. 

Already, the options pits are full of bears, with 5,513 puts across the tape so far -- seven times what is typically seen at this point -- compared to just 868 calls. Most popular is the April 3 put, while positions are being opened at the weekly 3/27 2-strike put. 


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